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Child Tax Credit

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JANUARY 2014  |  Download Adober PDF icon

Why Cutting the Child Tax Credit Is Bad Policy

Nearly every year, members of Congress attempt to end the refundable Child Tax Credit (CTC) for workers who pay their taxes using an Individual Tax Identification Number (ITIN) instead of a Social Security number (SSN). This cut would affect workers who are ineligible for an SSN and therefore pay taxes to the federal government using the only means legally permitted—the ITIN. The CTC, as well as the refundable portion (the Additional Child Tax Credit, or ACTC) were enacted to help struggling families financially care for their children. The CTC has proven successful in preventing millions of children from sinking further into poverty.

Denying eligibility for the refundable portion of the CTC would:

Negatively impact hardworking low-income families

  • This is an attack on the children of hardworking ITIN taxpayers whose families pay more than $9 billion in payroll taxes each year.[1]
  • This cut would deny up to 4 million U.S. citizen children much-needed assistance for covering the costs of necessities, including rent, clothing, and food.[2]
  • This would halt needed support for over 2 million working poor families who pay taxes, including sales and payroll taxes.[3]

Betray the Latino community

  • This cut will hit Latinos hardest. Over 80 percent of those impacted would be Latino families.[4]
  • This cut will deepen poverty. There are now more than 15 million children living in poverty in the United States.[5] Nearly forty percent of these children are Latino.[6]

Threaten children’s wellbeing

  • Any change will harm children—the very population the tax credit is intended to benefit.
    The CTC has successfully lessened child poverty. In 2009, these credits protected approximately 1.5 million children from falling into poverty.[7]
  • In 2011, children of immigrants—nearly 9 million children—accounted for 30.5 percent of all children in the U.S. in low-income families.[8]

Hurt the working poor

  • Over 50 percent of families using the refundable CTC earn less than $20,000 per year, over 60 percent earn less than $25,000 per year, and over 75 percent earn less than $30,000 per year.[9]
  • Nearly half of these workers are raising children on hourly wages of $10 or less.[10]
  • Eliminating the tax credit for these families will take an average of $1,800 from the low-wage families per year.[11]
  • Without this tax credit, families may not be able to pay for basic needs such as groceries, utility bills, or child care.

Compromise the economic recovery

  • CTC dollars help grow local economies and support businesses. Every additional dollar received by low- and moderate-income families has a 1.5 to 2 times multiplier effect,[12] in terms of its impact on the local economy and how much money is spent in communities where these families live.

FOR MORE INFORMATION, CONTACT

Ellen Battistelli, Policy Analyst, battistelli@nilc.org, or
Avideh Moussavian, Economic Justice Policy Attorney, moussavian@nilc.org



[1] Recovery Act: Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits (Treasury Inspector General for Tax Administration, Ref. No. 2011-41-061, July 7, 2011) (hereinafter “TIGTA report”), www.treasury.gov/tigta/auditreports/2011reports/201141061fr.pdf, p. 12. According to this TIGTA report, in 2010, ITIN filers reported wages “of about $60 billion” (p. 12). When $60 billion is multiplied by the 12.4 percent payroll tax rate and the 2.9 percent Medicare tax rate, the result indicates that ITIN tax filers paid $9+ billion in payroll taxes in 2010.

[2] Jeffrey Passel, Unauthorized Immigrants and Their U.S.-born Children (Pew Hispanic Center, Aug. 11, 2010), www.pewhispanic.org/2010/08/11/unauthorized-immigrants-and-their-us-born-children/.

[3] TIGTA report, supra note 1, p. 4.

[4] Jeffrey Passel, supra note 2 (in 2009, there were 5.1 million children under 18 with unauthorized immigrant parents); Latinos Oppose Changes to Child Tax Credit (National Council of La Raza, updated Mar. 18, 2013), www.nclr.org/images/uploads/pages/Latinos%20Oppose%20Changes%20to%20Child%20Tax%20Credit%20Fact%20Sheet%20022713.pdf, fn. 3.

[5] Child Poverty by Selected Race Groups and Hispanic Origin: 2009 and 2010 (U.S. Census Bureau, Nov. 17, 2011), www.census.gov/newsroom/releases/archives/children/cb11-tps47.html.

[6] Gabriel Velasco, Childhood Poverty Among Hispanics Sets Record, Leads Nation (Pew Hispanic Center, Sept. 28, 2011), www.pewhispanic.org/2011/09/28/childhood-poverty-among-hispanics-sets-record-leads-nation/.

[7] Policy Basics: The Child Tax Credit (Center for Budget and Policy Priorities, updated Feb. 1, 2013), www.cbpp.org/cms/index.cfm?fa=view&id=2989.

[8] “Children in Immigrant Families,” The United States: Social and Demographic Characteristics (Migration Policy Institute website), www.migrationinformation.org/datahub/state.cfm?ID=US.

[9] SOI Tax Stats: Individual Statistical Tables by Size of Adjusted Gross Income (Internal Revenue Service webpage), www.irs.gov/uac/SOI-Tax-Stats---Individual-Statistical-Tables-by-Size-of-Adjusted-Gross-Income (search for “All Returns: Tax Liability, Tax Credits, and Tax Payments,” then “Individual Complete Report (Publication 1304), Table 3.3,” then “Tax Year 2011”).

The 50 percent figure was obtained adding the number of returns with a gross income of less than 20,000 who received the refundable Child Tax Credit (Column CY, adding Rows 11 through 15, equaling 10,349,801) and dividing it by the total number of returns receiving the refundable Child Tax Credit (20,485,403) to equal 0.505 (greater than 50 percent).

The 60 percent figure was obtained adding the number of returns with a gross income of less than 25,000 who received the refundable Child Tax Credit (Column CY, adding Rows 11 through 16, equaling 13,397,806) and dividing it by the total number of returns receiving the refundable Child Tax Credit (20,485,403) to equal 0.654 (greater than 60 percent).

The 75 percent figure was obtained adding the number of returns with a gross income of less than 30,000 who received the refundable Child Tax Credit (Column CY, adding Rows 11 through 17, equaling 15,722,738) and dividing it by the total number of returns receiving the refundable Child Tax Credit (20,485,403) to equal 0.767 (greater than 75 percent).

[10] David Rogers, “GOP Targets Immigrants in Tax Credit,” Politico, Jan. 12, 2012, www.politico.com/news/stories/0112/71370.html. The article states that, according to TIGTA, ITIN taxpayers receiving the refundable portion of the CTC make an average of about $21,240 per household. Based on 2,000 hours of full-time work in a year, this translates to an average hourly wage of $10.62/hour.

[11] See TIGTA report, supra note 1, p. 5. In 2010, the average ACTC refund amount for ITIN taxpayers in processing year 2010 was approximately $1,800.

[12] Dollar Wi$e Best Practices: Earned Income Tax Credit, 2nd edition (The United States Conference of Mayors Council for the American City, undated), http://usmayors.org/dollarwise/resources/eitc08.pdf, p. 2.